Three-quarters of people suffering from mental illness are not getting treatment, experts said.
A damning report concludes that the NHS is failing people suffering from mental illness.
The authors of the report say that the under-treatment of people suffering from mental illnesses is the most "glaring case of health inequality" in Britain.
They say that mental illness now accounts for nearly half of all ill health suffered by people in Britain - and it can be more debilitating than some chronic diseases - but only a quarter of those involved are receiving treatment.
Effective psychological therapies exist but are not widely available, the report by the Mental Health Policy Group from the London School of Economics (LSE) found.
Two-fifths of patients suffering from anxiety or depression can recover if they are treated by means such as cognitive behavioural therapy. The authors say that if such treatments were more widely available, it would cost the NHS little or nothing because it would produce savings in other healthcare areas.
Mental illness can manifest itself in physical symptoms and the group of experts estimate such symptoms cost the NHS at least £10 billion. Much of this money would be better spent on psychological therapies, they claim.
"Despite the existence of cost-effective treatments it (mental illness) receives only 13% of NHS expenditure," they write.
"The under-treatment of people with crippling mental illness is the most glaring cause of health inequality in our country."
One third of families have a member who is currently suffering from a mental illness, they say. It accounts for nearly half of absenteeism at work and mental illness accounts for nearly half of people on incapacity benefits.
The authors, who include doctors, psychologists, NHS managers and economists, condemn local health commissioners for inappropriately using allocated mental health funding and say that in some areas mental health provisions are being cut.
The authors also recommend better training of GPs and suggest that recruitment into psychiatry should be increased.
They also call for an "imperative" upgrade of specialist help to provide children with affective therapies, as there are 700,000 children in Britain with behavioural problems, anxiety or depression.
Professor Lord Layard of the LSE Centre for Economic Performance said that mental health is so prevalent in society that it deserves its own cabinet minister.
He said: "If local NHS commissioners want to improve their budgets, they should all be expanding their provision of psychological therapy.
"It will save them so much on their physical healthcare budgets that the net cost will be little or nothing.
"Mental health is so central to the health of individuals and of society that it needs its own cabinet minister."
The report concludes: "Mentally ill people are particularly vulnerable.
"They are often afraid to seek help or even say they are unwell, and so are their relatives. But they represent nearly one half of all health-related suffering in this country.
"Within the NHS they represent the greatest areas of unmet need among adults and children."
Mental health charities welcomed the report.
Sane chief executive Marjorie Wallace said: "We are at an all-time low in the response of mental health services to people with severely disabling mental illness.
"While the Government has put money into psychological therapies, on the other hand resources are being drained from the fundamental care and treatment of people in crisis, those in need of in-patient care such as the suicidal, and those in the community where the cuts are depriving them of the few things that make their lives more tolerable, such as day centres, clubs, activities and occupation.
"We support Lord Layard's call to action, before there are too many casualties and the services become too fragmented to help them."
Mental Health Foundation chief executive Dr Andrew McCulloch added: "The report underlines the fact that mental health remains a poor relation to physical health despite the major links between depression, diabetes and heart disease, for example.
"We have to tackle a situation where only 25% of people with common forms of mental illness are receiving treatment and where there is massive under-investment in mental health research."
The Royal College of General Practitioners said that GPs are facing an "upward spiral" of patients suffering from mental illness.
Professor Clare Gerada, chair of the RCGP, added: "GPs face tremendous challenges in caring for patients with mental health problems in primary care and we welcome any development which will help us improve their care.
"Talking therapies have the potential to transform thousands of patients' lives and we applaud Lord Layard and his team for their efforts to extend the programme further.
"This would be a major step forward, not only for patients, but for GPs and other health professionals working in mental health."
Sarah Brennan, chief executive of Young Minds, said: "Lord Layard is right to highlight how mental health is often the Cinderella service of the NHS. Yet the picture is even worse for children and young people's mental health where for every pound spent by the NHS less than a penny is spent on Children and Adolescent Mental Health Services.
"Getting it right for children when they are young plays a key part in reducing the number of people who suffer with mental illness throughout their lives."
Care Services Minister Paul Burstow said: "Mental ill-health costs £105 billion per year and I have always been clear that it should be treated as seriously as physical health problems.
"We will shortly publish our plans to make sure the NHS, councils, voluntary organisations and others can play their part in improving the nation's mental health.
"The Coalition Government is investing £400 million to make sure talking therapies are available to people of all ages who need them.
"This investment is already delivering remarkable results."